A few months after the promises made at the 2021 United Nations Climate Change Conference (COP-26), several countries reduced the mixing rates of biodiesel to diesel, generating crises for producers.

In Brazil, according to a schedule established by the National Energy Policy Council (CNPE), in resolution 16/2018, the percentage of biodiesel added to diesel would have gradual increases until reaching 15% in 2023. The figure should already be at 13% by 2021 and reach 14% from March 2022. However, biodiesel has been parked at 10% (B10) since March 2021.

After the announcement by the Ministry of Mines and Energy (MME) that the figures should continue at 10% by the year 2022, the issue has reached justice. Hardly, however, there should be changes in this new planning and a crisis in the biodiesel production sector is already established. It is estimated that 1.9 million tons were no longer sold in the country with the change in planning.

In a statement, the CNPE and the MME say that the reduction follows the interests of society, while maintaining the predictability of the value of diesel. About 70% of Brazilian biodiesel has its raw material in soybeans, as the commodity has had constant increases in recent months, there are fears that this may cost the price of diesel in pumps.

Producers challenge government calculation

Representatives of the biodiesel production sector dispute the information that reducing the mixing rate will bring savings to consumers. In a statement, the Brazilian Association of Vegetable Oil Industries (Abiove), the Association of Biofuel Producers of Brazil (Aprobio) and the Brazilian Union of Biodiesel and Biokerosene (Ubrabio) state that the calculation released by the Ministry of Mines and Energies presents a series of inconsistencies.

The Ministry would have compared the price of increasing the use of biodiesel with the price of nationally produced diesel. However, domestic production does not meet these demands and the diesel used will be imported, which is very much the final value. Imported diesel has already increased by 77% between December 2020 and December 2021.

The march 2021 reduction from 13% to 10% also had few effects on the increase in diesel. It is estimated that the decline in the agreed values will mean a cut of 2.4 billion liters in demand, which can generate an impact of US$ 2.5 billion on Brazilian income. In addition to the thousands of jobs affected, producers fear the loss of reliability of investors in the sector. Finally, the increase in the import of fossil fuels to "complete" demand will result in more than US$ 1.2 billion in spending.

For producers in the sector, the government's decision demonstrates an alignment with the oil production sector. The decision also prevents the fulfillment of promises made in COP-26 concerning the reduction of the emission of gases from the burning of fossil fuels.

International crisis in the sector

Several countries have made decisions similar to Brazil's and have backed down on biodiesel expansion plans. This is the case of Indonesia, one of the countries that most employ this technology, which intended to use 40% biodiesel in diesel (B40), but went back and set the annual rate at the current 30%.

Argentina reduced the mixture from 10% to 5%. Thailand suspended the sale of diesel with mixture between 20% and 10% and set the rate at the European standard of 7%. Uruguay and Paraguay are other examples of countries that have not increased the mix.

The international justification for the retreat in commitments is also in relation to the increase in commodity prices, which would be raising the value in the pumps. Prices, however, increased much lower than the increase in oil in the same period.

Source: Canal AGRO